Quindell PLC (LON:QPP) (OTCMKTS:QUPPF), the insurance claim service provider, is facing questions over a loan agreement facilitating chairman Rob Terry and two others in buying the company’s stock.
Monday morning, the company went into damage control mode explaining what is likely to happen to the shares over which Equities First Holdings (EHF) now has the rights.
Quindell’s complex loan agreement
Last week, Robert Terry and two other board members announced that they had bought shares in Quindell PLC (LON:QPP) (OTCMKTS:QUPPF), whose market share has languished since a short selling attack earlier this year. Today, the AIM-quoted company issued a clarification about the financing agreement in which three directors have used part of their existing shareholdings to finance further stock purchases.
The insurance claims processor disclosed that the directors have loaned 10.4 million shares to US-based Equities First Holdings, receiving nearly £ 9 million in cash net of fees, though so far only £2.1 million has been invested in the new shares.
Robert Terry and finance director Laurence Moorse have committed to using all the remaining funds towards further share purchases, but non-executive director Stephen Scott will also use the funds to “cover certain other tax liabilities”.
The three directors of the insurance claim service provider have ceded voting rights over the shares that they have pledged as collateral. However, they have agreed to repurchase the stock in two years’ time or if the price falls significantly.
Dogged by allegations
Interestingly, John Harrington of Proactive investors notes in some quarters, Quindell PLC (LON:QPP) (OTCMKTS:QUPPF)’s latest arrangement has been interpreted as a bet by the directors that the company’s shares will be lower in two years’ time than they were at the time the original share transfer took place.
The past few months have been disastrous for the Quindell. Last May it was forced to clarify its use of a derivative to complete an acquisition, having initially incorrectly described the instrument to analysts. This year the firn abandoned a much-vaunted plan to move to a listing on London’s main stock exchange, following the release of a dossier of allegations from short-sellers Gotham City Research.
Last month, the Insurance Times reported that several insurance companies featured on Quindell PLC (LON:QPP) (OTCMKTS:QUPPF)’s website no longer work with the professional services company.
As reported earlier, in April, U.S. group Gotham City Research released a scathing report suggesting that the company’s reported profits are materially incorrect, its operations exaggerated, and its shares are worth no more than 3 p per share.
However, the insurance processor successfully sued for libel over the report.
Gotham City Research also charged that Robert Terry was taking money out of the public firm through a variety of methods. This included payments to related companies as well as paying his wife to work as “Finance Director” at the firm.